Last week, the United States Senate passed a tax bill that would have major implications for universities. This comes on the heels of a bill that passed the US House of Representatives, which contained provisions that would make it much more costly to be a student. To quote from a piece by the University of Michigan President Mark Schlissel and Michael V. Drake,
The House bill would repeal current tax incentives, including the Student Loan Interest Deduction (which in 2014 helped 12 million taxpayers), the tax-exempt status of tuition waivers for graduate students serving as teaching and research assistants (which helped close to 145,000 people in 2011-12), and the above-the-line deduction for qualified tuition and related expenses.
This means interest on student loans would be treated just like credit card interest — neither would be deductible, at a time when many are struggling to repay their student loans. Graduate students who work their way through school by serving as research or teaching assistants receive tuition waivers that would be taxed. And students and parents from families with moderate incomes will no longer be able to deduct up to $4,000 in qualified higher education expenses from their taxable income.
The House bill would also repeal or devalue key credits that help low- and middle-income students, including the Lifetime Learning Credit, the Hope Scholarship Credit and the American Opportunity Tax Credit. The lower-income students who use these credits are those who can least afford to pay more for their educations.
The main hope at this point comes from the House and Senate having passed very different bills. The House bill contains the provision that would mean tuition waivers are no longer tax-exempt. The Senate bill does not contain this provision.
We’ve now reached the stage where the House and Senate bills have be reconciled — that is, where legislators and their staffers need to work out the differences between the two bills (which, as I said above, are pretty different). Universities are working hard to make sure that the final legislation does not include the House version of the grad student tuition waiver (or lack thereof).
One piece of information that came to light yesterday about a mistake in how the Senate bill taxes corporations means that it is more likely that the reconciled bill will also get rid of the grad student tuition waiver, which is not good news for graduate students or universities. The reason for this is that legislators will want to fix that mistake to add back corporate tax deductions, which will increase the cost of the bill. They’re already at the $1.5 trillion max, so they need to do other things to increase revenue. Like tax grad students. In other words:
That’s the bad news. The good news is that the mistake also means the Senate is likely to have to vote again on the bill. But I think focus yesterday was on how ridiculous it is that Republicans passed legislation with such a major mistake in it (which is true), without also focusing on the implications of this for the grad student tax.
I asked people who know a lot about this what someone like me or the students I know who are concerned about this can do. There was universal agreement that it is really important for students and others who care about this to contact their Representatives and Senators to let them know how they feel. The National Humanities Alliance has a tool that will make this easier for you. You can use the standardized language they provide, or you can personalize things to your situation. I always get nervous when calling my policymakers (even though I usually end up just leaving a message rather than speaking to an actual person and, when I have spoken to a person, they’ve always been very polite). So, I write out what I want to say ahead of time.
One thing to consider for students: if you live somewhere like Ann Arbor where our representative (Debbie Dingell) already shares our concerns with the bills but are still registered to vote in another area (say, the place you grew up) and the person in that area does not share your concerns about the bill, it might be more effective to contact the person who does not currently share your concerns. And, if the debate continues through the holiday break, you can try to visit your Representative and Senators at their district offices!
Another question that comes up is whether to contact the local office number or the DC office. I’ve been told by some people that it’s better to call the DC office (and the tool I linked to above will help you figure out those numbers). But if you can’t get through there, you can try the local offices. If you are unsure of who your representative is, you can click here. (By the way, other folks say it doesn’t matter which office you call. Everyone agrees that the most important thing is that you call somewhere, with where you call being less important!)
So, I like Ethan White’s strategy:
- The American Association for the Advancement of Science (AAAS) has more information on the proposed tax overhaul, suggestions for things you might want to highlight when talking to legislators, and information on how to take action.
- The National Association of College and University Business Officers (NACUBO) is organizing a #DontTaxEducation campaign. Their message “Don’t let Congress deliver a disproportionate and unprecedented hit on higher education. Ask lawmakers to accept the Senate position on these provisions.” Their page will help you contact your legislators.
Dynamic Ecology 
FYI while the tuition waiver taxation is a problem most grad students – possibly even international students – will be able to limit its impact to one year by obtaining residency in the state in which they’re enrolled. I think in most states you need one year of residence as evidenced by a drivers license and a few bills like power or water from your residence.
I’m an in-state resident for my graduate school, but taxation on my in-state tuition waiver will still effectively double my tax bill. In-state tuition is less than out-of-state, but not free in most places. And this only applies to public universities.
If you have a full tuition waver, unfortunately there’s no escape. When I was I grad school, however, the common practice was to have an out-of-state waiver and to pay in-state tuition from the stipend, which, at the time, was pretty small.
Depends on the school. At my PhD school, you couldn’t get in-state residency just based on attending school there (it literally says this in the residency requirements for the school). International students can never get in-state because you’re by definition a non-resident. I was a resident alien for my working (non-immigrant) visa but shifted to non-resident alien once I was under a student visa.
“just for going to school there…”
That sounds accurate. You have to establish a residence off campus get a local drivers license, and possibly in other respects show that you actually live there.
It may be that some states prevent residency for students but its worth checking the details
(as a reply to jim below). No, I meant what I said – you can’t for just attending school. It has nothing to do with where you’re living (on or off campus). The only way they might let you establish residency in the state was to buy a house. There is very serious wording on the website about this issue. Talking to friends, their schools were the same. Be careful about using words like ‘most’ if you’re unsure of the impact. Especially in a case like this when you appear to minimizing the impact of a potentially very negative tax law change.
Perhaps you’d do better by actually looking up the requirements. I looked up the reqs for several states in a few minutes.
California, Arizona, Nevada and Idaho allow students to establish residency for tuition purposes mostly as I described in my original post.
The rules in Michigan, Washington and Oregon appear to prohibit students from establishing residency.
Also its an obvious easy way around the tax for states to allow,say, employed students, to establish residency.
Jim: California, to pick one of your examples, allows you to establish residency after a year, but in state tuition is still around $14-16,000 a year. Of course that isn’t as bad as being taxed on out of state tuition, but the distinction between in vs. out of state tuition is really pretty minor compared to the more obvious point that taxing any of these tuition waivers will make grad school unaffordable for many students, especially those who don’t come from a place where they can fall back on financial support from family. You say that when you were in grad school you paid in state tuition from your stipend. That may be true, but the current take home stipend at UC schools for a full year of TA-ing is in the low $20,000 range. Good luck covering your own tuition on that stipend. Obviously, the financial situation for grad students has changed and comparisons to ‘when you were a grad student’ don’t seem relevant for the changes that this bill would enact.
Bloomberg News is reporting that the grad student tax has been dropped from the bill! Great news, hope it holds. Can’t count your chickens until the final bill is voted on.